Argentina's recovery

[doodle]

Argentina provides another example of why austerity doesn't work and bigger government can be part of the solution:

http://www.nytimes.com/2011/09/02/opini ... tango.html

Greece needs to take a lesson from this and just get it over with. Eventually, I think we will see a great number of countries simply hit the reset button and start again.

I wonder how much austerity Americans are going to be willing to take... With demographic led declining growth, I have a feeling that government is going to continue to pack trillions onto the national debt over the next decade. When the final bill from an already dead generation starts to weigh down the future prospects of a group of people who were still learning to tie their shoes when this debt was amassed, I think that default will be become a very popular political position. (Note to MMT brigade, I am categorizing money printing as a form of "default".)

[doodle]

Is there an example of a major country that has returned to prosperity through austerity when GDP exceeded 100% of GDP? From my understanding Sweden is about as close as any country has come. Back in the early 90's they were running 10% annual deficits, but their debt to GDP was in the neighborhood of 80% of GDP. It was only through their unique culture and ability to raise tax revenue dramatically while at the same time slashing benefits that they were able to emerge from the crisis. With the right wing in America so anti tax, I don't see this happening anytime soon. Slashing benefits and fighting jobs programs for unemployed and impoverished people doesn't seem to be like a plan that will lead to prosperity again.

[stone]

Wasn't a key part of Sweden's recovery down to them not protecting bank share holders and bond holders when the Swedish banks went belly up in the 90s? They protected depositors but let bank share holders and bond holders take a total loss. The USA/UK only let Lehman's bond holders take a hit. Perhaps what needed to happen was for all bank shares and bonds to be wiped except for the most prudent tiny minority of banks??

[doodle]

Stone,

Wasn't a key part of Sweden's recovery down to them not protecting bank share holders and bond holders when the Swedish banks went belly up in the 90s? They protected depositors but let bank share holders and bond holders take a total loss.

From my understanding they extracted pounds of flesh from the banks...http://www.nytimes.com/2008/09/23/busin ... krona.html

[Indices]

Wasn't a key part of Sweden's recovery down to them not protecting bank share holders and bond holders when the Swedish banks went belly up in the 90s? They protected depositors but let bank share holders and bond holders take a total loss. The USA/UK only let Lehman's bond holders take a hit. Perhaps what needed to happen was for all bank shares and bonds to be wiped except for the most prudent tiny minority of banks??

I find this highly unlikely. Hoover did this to bond holders and depositors and the result was the almost complete collapse of the American financial system. Bank bailouts, while possibly immoral, prevent a wholesale collapse. Unfortunately if they are blank checks without mandates to lend we get a credit crunch.

[stone]

Indices, the key difference is that Sweden protected depositors whilst Hoover did not. Protecting depositors is a totally different kettle of fish from protecting bond holders.